Once you have paid for your resale property, at the agreed price and paid the taxes due on the transaction, you would likely assume that the matter is closed. Unfortunately this is not always the case. 

In the introduction to this book I described how, historically, it was common practice to under-declare the value of the property on the title deed. ITP would be calculated on the declared value thus reducing the amount of tax payable. In order to combat this practice the authorities introduced a system of “Complimentary taxation”.

Under this system, if the tax authorities determine that a property was purchased below its market value they can issue a demand for the extra tax that would have been paid had the property been sold for, what they consider to be, its true market value.  

The tax authorities will assess the market value using data from the land registry, local municipal authorities and market trends, calculate the difference between the value they give the property, and the price at which it’d transfer was declared in the deed and then charge a ‘Complimentary’ tax on the difference at the locally applicable rate of ITP.

They have up to 4 years to issue this bill and, as if it’s not painful enough, they will add interest onto the figure from the date on which the deed was signed. If you are purchasing a property for a bargain price you should consider the possibility that you may be charged a complimentary tax in the future.

You can either hold money in reserve to cover the bill should it drop on your doormat, hold money in reserve to pay a lawyer to contest the tax authorities' calculation (and of course keep funds aside incase they are unsuccessful), or volunteer to pay ITP on the likely market value when you purchase the property and put any worry aside. I

n some areas it is relatively easy to find government data on the market values that they apply and use this information to help guide your decision. In some areas it is not so simple. In all cases it is advisable to seek advice from your lawyer making sure that they are aware that the price you are paying is relatively cheap.

It is also advisable to keep records of all transactions and transfers as well as the estate agent’s property details and any correspondence regarding negotiations on the property price, also keep any records of the state of the property when you purchased it and of expenses incurred when renovating the property to bring it up to a normally acceptable standard. You may find that these records are very valuable.

Sadly (and I expect this goes without saying) if the authorities assess that you paid more than the market value for your property, they will not give you a rebate.